The Monetary Terrorism of the Holy Roman Empire

Mike Dash calls the “Kipper und Wipper” period of the Holy Roman Empire “arguably the most bizarre episode in all of economic history.”Not only was the currency in a state of increasing debasement, but many city-states actively participated in the debasement in an attempt to weaken their neighboring states.This is actually considered “monetary terrorism,” and while uncommon today, was a standard practice for Germany in past centuries. The phrase “Kipper und Wipper” has debatable beginnings; kipper could be translated as “clipping” or “to tilt,” with wipper being “seesaw” or “to wag.” Either way, the phrase indicated dishonest practice with coinage: clipping the coins themselves, and unfair measuring practices that allowed debased coinage to be exchanged for precious metal coins.The coinage of Europe had already suffered a blow with the influx of precious metals from the New World. The city-states of Europe were already accustomed to having foreign currency circulate freely; this was possible largely due to the public’s faith in the value of the coinage. A reeding had not yet been invented, a precious metal coin could be easily clipped; in addition, the metal in a coin might have been mixed with lower-value metal. As the Thirty Years’ War got underway in the early half of the 17th century, Holy Roman city-states began to actively debase currency, hoping to raise revenue for the war coffers. When brought in for exchange, high-value coins were placed on rigged scales, or the exchangers would keep the scales moving so as to fool the eye. The high-value coinage was then swapped for debased currency.According to Smithsonian Magazine, “The coins minted in the Empire reflected this barely suppressed chaos. In theory the currency was controlled and harmonized by the terms of the Imperial Mint Ordinance issued at Augsburg in 1559, which specified, on pain of death, that coins could be issued only by a select group of imperial princes via a limited number of mints that were subject to periodic inspections by officials known as Kreiswardeine. In practice, however, the Ordinance was never rigorously enforced, and because it […] cost more to mint low-denomination coins than larger ones, the imperial mints soon stopped producing many smaller coins.”This vacuum of smaller coinage lead to a strong demand for smaller-denomination coins, since these were used in most daily transactions. Smaller coins began flooding into the states of the Holy Roman Empire, and unauthorized mints popped up frequently. As the number of mints increased, demand for coins rose, and the mints began to issue debased coinage, trying to stretch the precious metal further. Brunswick, for example, had 17 mints in 1620, and 40 by 1625.Most states did not debase their own coinage, hoping to maintain a reputation for high-value coins. Instead, the state would issue debased imitations of the coins of neighboring states, and spend them in states even farther away. Charles Kindleberger, an economic historian, writes, “Debasement was at first limited to one’s own territory. It was then found that one could do better by taking bad coins across the border of neighboring principalities and exchanging them for good with the ignorant common people, bringing back the good coins and debasing them again. The territorial unit on which the original injury had been inflicted would debase its own coin in defense, and turn to other neighbors to make good its losses and build its war chest. More and more mints were established, debasement accelerated in hyper-fashion.” This actually worked, for a little while, but soon the public realized what was happening; riots occurred, and in many places, soldiers refused to fight unless they were paid in verified non-debased currency.The increasingly-corrupt mints constantly found new ways of sneaking debased coinage into circulation. Many kept a certain number of good coins in storage, to be brought out when investigators came poking around. Bad coins were coated in precious metal, or hidden in produce to be smuggled past city gates. Such mints could not stay in business long, of course; once their bad coinage was identified, the mint was forced to close. However, not only did the minters often open new mints, but even formerly-reliable mints were forced to issue debased coinage, as they could no longer afford to produce good coins at the current rate of inflation.A pamphlet from the time reads,“As soon as one receives a penny or a groschen that is a bit better than another, he becomes a profiteer.… It follows that doctors leave the sick, and think more of their profits than of Hippocrates and Galenus, judges forget the law, hang their practices on the wall and let him who will read Bartholus and Baldus. The same is true of other learned folk, studying arithmetic more than rhetoric and philosophy; merchants, retailers and other trades—people push their businesses with short goods.”In addition to civic unrest over the economic crisis, the states began to receive taxes and fees in debased coinage; the practice of coin debasement ended around 1623, but the damage was done. The low-value coins were now in circulation in Germany, Austria, Bohemia, Poland, and Hungary. It was common to see children in the streets playing with piles of worthless coins. The cost of food rose an estimated 800%, leaving the poor (and those in cities without the means of producing food) in dire straits. The rulers of the Empire eventually decided to go back to the terms of the 1559 Mint Ordinance, but it was many decades before the effects of the Kipper Und Wipper began to fade.